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Market Analysis: Feb 11, 2000

posted on February 11, 2000


THE NATION'S INVESTMENT COMMUNITY THIS WEEK APPEARED CONFUSED OVER WHETHER INTERNET HACKERS REPRESENTED A THREAT TO THE NATION'S BURGEONING E-COMMERCE SECTOR OR WAS IN FACT A FINANCIAL ENDORSEMENT. THE HACKERS SEEMED TO HAVE TARGETED ONLY THE HIGHEST PROFILE MEMBERS OF THE SECTOR. BEING HACKED MAY BECOME THE NEW STATUS SYMBOL AMONG THE DOT-COM SET.

THE GRAIN MARKETS GAINED GROUND THIS WEEK ON WEATHER AND CROP SUPPLY CONCERNS. FOR THE WEEK WHEAT PRICES GAINED MORE THAN 12-CENTS IN CHICAGO, WHILE CORN PRICES WERE UP MORE THAN TWO CENTS. SOYBEAN FUTURES WERE UNCHANGED TO FRACTIONALLY HIGHER IN A VOLATILE WEEK OF TRADING. SOYBEAN MEAL FINISHED THE WEEK WITH A $1.50 GAIN. COTTON FUTURES WERE 89-CENTS HIGHER FOR THE WEEK.

IN LIVESTOCK, FED CATTLE FUTURES WERE DOWN $1.03. FEEDER CATTLE CLOSED $1.33 LOWER. THE LEAN HOG CONTRACT FINISHED $2.55 LOWER.

IN THE FINANCIALS, COMEX GOLD GAINED 70-CENTS. THE EURO FINISHED 40-BASIS POINTS HIGHER AGAINST THE DOLLAR. AND, THE CRB INDEX FINISHED THE WEEK MORE THAN ONE-AND-A-HALF POINTS HIGHER TO CLOSE AT 214.55.

Market Analysis: Feb 11, 2000

HERE NOW TO LEND US HIS INSIGHT IS ONE OF OUR REGULAR MARKET TO MARKET ANALYSTS, DOUG HJORT. WELCOME BACK.

Hjort: THANK YOU, MARK.

Pearson: WELL, WHAT A WEEK IT WAS FOR THE WHEAT MARKET. WE FINISHED OUT THE WEEK ALMOST 12 CENTS HIGHER. A BIT OF A SELL-OFF ON FRIDAY IN ALL THE GRAINS, BUT FOR THE WEEK, UP 12 CENTS. IS THIS JUST A LOT OF MONEY GOING LONG IN THE FUNDS, OR IS THERE SOME GENUINE CONCERN ABOUT THE CROP THIS YEAR?

Hjort: WELL, I THINK IT'S MOSTLY A SPECULATIVE MOVE. WE BROKE THROUGH SEVERAL TECHNICAL RESISTANCE AREAS THIS WEEK, AND FINALLY, ON THURSDAY, GETTING THROUGH THE LAST ONE JUST CAUSED AN ADDITIONAL AMOUNT OF FUND BUYING. THE FUNDAMENTALS DON'T SUGGEST THAT WE SHOULD RALLY THE WHEAT MARKET AT ALL YET. AND THAT WAS BORNE OUT AGAIN WITH THE REPORT FRIDAY MORNING. THE TECHNICAL SIDE OF THE MARKET, THOUGH, WAS PARTLY PUSHED BY A VERY GOOD EXPORT SALES NUMBER THIS WEEK. NOW, USDA CAME BACK, THEN, ON FRIDAY MORNING AND LOWERED THEIR PROJECTION FOR EXPORTS FOR THE YEAR, BECAUSE WE ARE RUNNING WELL BEHIND. YOU'RE NOT GOING TO RALLY THE WHEAT MARKET MUCH MORE THAN WHERE IT IS NOW, IN MY OPINION, UNLESS YOU REALLY GET IN AND HAVE SOME SERIOUS PROBLEM WITH NEW-CROP PRODUCTION. SO I THINK THIS RUN HAS PROBABLY PRETTY WELL RUN ITS COURSE RIGHT NOW ON THE WHEAT, PROBABLY A BIT OF A SELLING OPPORTUNITY IF ANYBODY HAS ANY OLD-CROP WHEAT LEFT.

Pearson: ALL RIGHT. AND PRICING NEW CROP, YOU'RE IN NO HURRY TO DO THAT?

Hjort: NO, I'M NOT, BECAUSE YOUR PRICES OUT THERE FOR MOST WHEAT REALLY AREN'T MUCH BETTER THAN LOAN RATE, AND I WOULD NOT BE WILLING TO PRICE IT AT THAT PRICE.

Pearson: ALL RIGHT. LET'S MOVE OVER TO THE CORN MARKET... ALSO EXPERIENCED A LITTLE BIT OF AN UP WEEK THIS WEEK. AND, OF COURSE, A LOT OF INTEREST IN CORN AND A LOT OF CONCERN ABOUT WHAT CAME OUT IN THE GOVERNMENT'S REPORT ON FRIDAY, WHICH WAS INITIALLY GREETED AS KIND OF A HO-HUM REPORT.

Hjort:, WELL, IT WAS HO-HUM BECAUSE IT CAME OUT PRETTY MUCH AS EXPECTED. THE EXPORTS WERE CUT 25 MILLION BUSHELS. CHINA EXPORTS WERE INCREASED FROM FIVE MILLION TON TO 8 MILLION TON. MANY IN THE TRADE SAY THEY'VE ALREADY -- CHINA HAS ALREADY SOLD 10 MILLION OR MORE, IT JUST HASN'T BEEN REPORTED YET. SO THE CORN MARKET IS OKAY. BUT THE BULLISHNESS IN THE CORN MARKET IS DEVELOPED WHEN YOU LOOK TO THE NEW YEAR BECAUSE, IF WE DO CUT ACREAGE A MILLION ACRES, BRING OUR YIELDS BACK TO A NORMAL LEVEL FROM LAST YEAR'S HIGH, AND YOU COULD CUT BACK ON YOUR STOCK LEVELS ONCE AGAIN, DIGGING INTO THEM NEXT YEAR. THEN, IF YOU HAVE ANY KIND OF A WEATHER CONCERN, YOU JUST DIG FURTHER INTO THAT. SO THE CORN MARKET, YOU'VE GOT VERY GOOD DEMAND THERE, BUT STILL WE'VE GOT AN ABUNDANT SUPPLY OF CORN IN THE UNITED STATES AND THE WORLD. SO THERE AGAIN, RALLIES ARE GOING TO BE DIFFICULT TO MAINTAIN, BUT I DO LOOK FOR PRETTY GOOD SUPPORT IN THE CORN MARKET.

Pearson: AT THIS STAGE OF THE GAME, LOOKING OUT TO, SAY, THE DECEMBER OVER $2.50, IS THAT A SELLING OPPORTUNITY?

Hjort: WELL, IT CERTAINLY IS ATTRACTIVE AND, YET, THE POTENTIAL IS THERE FOR THAT MARKET TO MOVE SIGNIFICANTLY HIGHER IF THERE IS A CONTINUATION OF THIS LA NINA AND WEATHER PROBLEMS REALLY DO START TO DEVELOP. SO I'M HOLDING OFF ON MAKING SALES RIGHT NOW. I WOULDN'T BE IN ANY REAL RUSH TO DO THAT, PROBABLY, FOR AT LEAST ANOTHER MONTH.

Pearson: THE SOYBEAN SITUATION, THE SITUATION IN BRAZIL, TALKING ABOUT LA NINA AND ITS IMPACT, WHAT DO YOU SEE HAPPENING FROM THIS STAGE OF THE GAME? ARE WE STILL GOING TO BE TRADING A BRAZILIAN WEATHER MARKET FOR ANOTHER COUPLE WEEKS?

Hjort: WELL, PROBABLY A LITTLE BIT BUT THAT'S PRETTY WELL PAST US NOW. ON FRIDAY'S REPORT, USDA DID NOT CHANGE THEIR SOYBEAN PRODUCTION NUMBER OUT OF SOUTH AMERICA. THEY CUT BRAZIL 500,000, RAISED ARGENTINA 500,000. AND I THINK THAT SURPRISED A LOT OF PEOPLE BECAUSE WE'VE BEEN TALKING ABOUT WEATHER STRESS DOWN THERE, AND HERE'S THAT'S NOT SHOWING UP IN OFFICIAL REPORT. IT WASN'T IN CORN EITHER, BY THE WAY. SO I THINK WE'RE FAR ENOUGH INTO THE GROWING SEASON DOWN THERE THAT, SURE, THE FINAL HARVEST RESULTS COULD CHANGE FROM WHAT THE CURRENT PROJECTIONS ARE, BUT I DON'T THINK WE'RE DEALING THAT MUCH WITH THE WEATHER MARKET. IN THE SOYBEANS, WE HAVE EXCELLENT DEMAND YET; EXPORT SALES RUNNING VERY, VERY STRONG. BUT THERE AGAIN, AS SOON AS THE SOUTH AMERICAN CROP STARTS TO DEVELOP OR STARTS GETTING INTO THE MARKET, OUR SALES ARE GOING TO GO DOWN. SO AGAIN, EVEN ON SOYBEANS, IT'S GOING TO BE VERY DIFFICULT TO TRY TO GENERATE MUCH MORE RALLY POTENTIAL THAN WHAT WE HAVE RIGHT NOW.

Pearson: AS WE LOOK AHEAD, NEW-CROP SALES ON BEANS AT ALL?

Hjort: NO, AND AGAIN BECAUSE WE'RE STILL BELOW THE LOAN RATE OUT THERE. IF WE'RE GOING TO SELL SOMETHING OR SELL FUTURES, YOU HAVE TO BE DARN SURE THAT WE'VE TOPPED THE MARKET AND WE ARE GOING TO HEAD ON DOWN, AGAIN, BECAUSE OF THIS WEATHER SITUATION THAT COULD DEVELOP THIS SUMMER.

Pearson: ALL RIGHT. REAL QUICK... COTTON MARKET POSTED SOME GAINS WEEK.

Hjort: WELL, IT DID. THE EXPORT MARKET THERE IS LOOKING BETTER, PRIMARILY BECAUSE OF THE STEP-TWO PROGRAM, AGAIN. ACREAGES ARE BEING DISCUSSED RIGHT NOW. SOME HOPE THAT WE MIGHT BE ABLE TO PULL THAT ACREAGE DOWN A LITTLE BIT, BUT IT DOESN'T LOOK LIKE FARMERS HAVE MUCH ALTERNATIVE TO DO THAT.

Pearson: SWITCHING OVER TO THE BEEF MARKET, WHAT'S YOUR OUTLOOK NOW FOR FED CATTLE THE NEXT 30 DAYS?

Hjort: WELL, THE NEXT 30 DAYS AND THE NEXT FOUR MONTHS, I LOOK FOR THE FED-CATTLE CASH PRICE TO MOVE PRETTY MUCH SIDEWAYS AND PROBABLY A $68 TO A $71 PRICE RANGE. THE FUTURES IS GOING TO CHOP AROUND A LOT. THE FUTURES GOT AHEAD OF THE CASH MARKET ONCE AGAIN, AND NOW, THIS WEEK, WE'RE SELLING OFF. WE'RE FORCED TO SELL BACK DOWN. I STILL LIKE THE CATTLE MARKET LONG-TERM. I THINK IT'S A VERY SOLID MARKET. BEEF DEMAND IS STILL GOOD, BUT WE'VE GOT RECORD CARCASS WEIGHTS AND RECORD BEEF PRODUCTION, SO PRICES ARE NOT GOING TO BE ABLE TO RALLY MUCH WITH THAT KIND OF PRODUCTION AHEAD OF US.

Pearson: LET'S TALK A LITTLE BIT ABOUT THE HOG MARKET. THAT, TOO, A LITTLE BIT OF PRESSURE THIS WEEK ON THE BOARDS AS FAR AS FARMERS ARE CONCERNED.

Hjort: YEAH, AND THAT CAME ABOUT BECAUSE OF A SURPRISE SIGNIFICANT BREAK IN THE CASH MARKET. NOW, WE WERE DOWN AS MUCH AS $3, $3.50 IN SOME MARKET IN THE CASH TRADE, AND THAT REALLY WAS NOT EXPECTED. THE PRODUCT MARKET WAS FIRMING AGAIN LATE IN THE WEEK. FUTURES STARTED TO RECOVER A LITTLE BIT. BUT REMEMBER, THE HOG FUTURES IN THE DISTANT MONTHS ARE TOYING WITH CONTRACT HIGHS... PUTTING CONTRACT HIGHS LAST WEEK, TESTED THEM AGAIN THIS WEEK, AND THEN SOLD OFF A LITTLE BIT. SO WE'RE NOT READY TO DO ANY HEDGING THERE, EVEN THOUGH THOSE SUMMER MONTHS WOULD LOCK IN SOME VERY NICE PROFITS RIGHT NOW. I THINK WE DO NEED TO DO SOME HEDGING LATER ON, BUT WE'RE PROBABLY THREE OR FOUR WEEKS AWAY FROM A TIMING DEVELOPMENT THERE.

Pearson: WE'RE TALKING ABOUT SOME OF THESE CONCERNS ABOUT LA NINA AND SO FORTH. 15 SECONDS OR SO, DOUG... WOULD YOU BE WORRIED ABOUT COVERING ANY FEED NEEDS IN THE NEAR-TERM?

Hjort: I WOULD HAVE SOME COVERED. I THINK A THIRD, MAYBE UP TO A HALF, AND SO ON, ESPECIALLY ON THE MEAL, BECAUSE OF THE STRONG DEMAND THAT WE DO HAVE WORLDWIDE. I DON'T THINK AT THIS STAGE OF THE GAME, THOUGH, IT'S WORTH EXTENDING COVERAGE BEYOND THAT.

Pearson: THANK YOU, DOUG HJORT. THAT WILL WRAP UP THIS EDITION OF "MARKET TO MARKET." NOW, BE SURE TO JOIN US AGAIN NEXT WEEK WHEN WE EXAMINE HOW A COUPLE OF FAMILIES HAVE EXPANDED THE PROFIT POTENTIAL OF THEIR FARM BY CAPTURING MORE VALUE FROM WHAT THEY'VE PRODUCED. UNTIL THEN, THANKS FOR WATCHING. I'M MARK PEARSON. HAVE A GREAT WEEK.

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